A lot of investors tend to think that investing in cryptocurrencies is a gamble, pretty much like placing a bet on an event. But as much as investments have their lows and highs, investing strategically can cushion you against some of the avoidable hurdles you are likely to face.
Every day the internet breaks the news of people making it big investing in cryptocurrencies.
This, to some extent, has been misunderstood by some people who imagine that cryptocurrency investment is a get-rich-quick kind of thing. These individuals further believe that all you have to do is to speculate well enough and, boom, cash starts trickling into your account.
There is more to cryptos than simply predicting the prices of various assets.
If you are going to stay profitable for a longer period of time, you will need a solid cryptocurrency investment strategy. Otherwise, your investment will be the gamble you will turn it into, you will win today and lose all of it tomorrow. And that could go on and on indefinitely.
So, how exactly can you maintain a sustainable cryptocurrency portfolio? You will need to put in place a proper plan to guide through your investment journey.
Lucky for you, we have outlined some key strategies that, if well-applied consistently, can keep you away from some of the common mistakes made by most cryptocurrency investors.
What You Need to Understand about Investing in Cryptocurrency?
There is no doubt that a lot of people have made millions of dollars off of cryptocurrencies, some within a period of time as short as days or weeks. Like I mentioned earlier, this has given a lot of beginners the wrong impression about this whole trade, making them bank their investment on sheer luck.
However, what most cryptocurrency newbies do not know is that you are more likely to lose money than make it as an entrant without any useful knowledge about the space. Most, if not all, the success stories you see all over the press today were not as a result of luck; a lot of hard work in terms of research and experimenting was put into it. And frankly, if you asked most of the people who have made it in the crypto space, they will tell you all sorts of horrible experiences they had to go through to learn the ropes.
They say people like to focus on the fruits of hard work, but no one ever really talks about the journey that led to success.
In this guide, we will show you the ins and outs of the cryptocurrency investment that no one seems to talk about.
Investing in cryptocurrency for the sole reason of doubling or tripling your money within a short period of time is never a good idea. You need to invest for the long-term benefits, including maintaining a sustainable income over time, as well as participating in the growing of one of the fastest developing forms of technology.
As we get into the fleshy parts of this guide, consider these important questions:
- Are you willing to start investing in cryptocurrencies strategically? If yes, great!
- Are you willing to put in the time to learn to how the cryptocurrency markets work and how to spot a good or a bad investment miles away? If yes, awesome!
Now that you are beginning to understand how responsible cryptocurrency investing is, let us debunk one more hurdle.
The Fear of Missing Out on the “In-thing”
Fear in itself prevents us from thinking and acting objectively – and fear of being left out when everyone seems to be doing something is one of the most common reasons why a lot of people get it wrong in any form of investment.
If the core reason why you jumped into the cryptocurrency world was to try your hand on the new kid on the block, then you might be headed in the wrong direction.
Many cryptocurrency projects have generated 10 times and more returns for their investors – but it is a bad habit for an investor to imagine that every other project will yield a similar amount or more returns.
Compare an individual who bought Bitcoin at $10,000 and above and another who bought it when the price was below $4,000. On the other hand, another investor buys it at the current price when there are a lot of market corrections. If all goes well, all are set to make some amount of profit at some point, but no one can really guarantee when and how much it will be.
The point is, if you wish to invest in cryptocurrency, let it be because you feel that it is the right investment for you and not as a result of being influenced by all the hullabaloo surrounding digital assets.
Research! Research! Research!
This strategy may seem obvious to many, but it is very much underutilized.
I tend to think that there are two kinds of research:
- The wrong research: This is the kind of research that a lot of people do. They simply check out the website of a cryptocurrency project, the price, the set-up process, and that is it. With minutes of research, they are proud owners of this or that currency.
- The right research: The right research denotes a detailed way of scrutinizing all the details relating to the coin(s) you wish to invest in. There are various sources of conducting proper research prior to taking up an investment. Let us look at a few places to start out on your research.
Check out the project’s white paper: The finer details of any coin or token are always indicated in its white paper. It is, therefore, very important for you to thoroughly analyze information such as the actual price of a coin, the objective of the company, the future expectations, and more.
There are a lot of fictional white papers all over the internet; you will need to be keen to be able to differentiate between realistic and non-realistic facts.
Know the faces behind the project: The internet businesses have been the biggest victims of scammers, hackers, and system failures. Extra caution must be taken to ensure that a given project has an existing dedicated team behind it with a purpose for their product. Also, try to access the public profiles of the team members behind a project, look out for anything suspicious things such as a lack of adequate experience in their role on the project, any complaints, among other things. The last thing you want to do is to invest your money on a project with non-existing members.
Understand the purpose of the project: You will need to ask yourself a couple of questions: What problem does the project solve? Is the problem genuine? Is the solution sufficient to solve the problem? This is meant to eliminate any fictional projects that create non-existing problems and, in turn, attempt to provide the solution.
Understand the industry: Many people do not take the time to understand the cryptocurrency sector. Just like any other investment, if you are keen enough, you will be able to pick up a pattern or two about how things run. For instance, prices of assets fluctuate every now and then, and this should not perturb you much since even the market prices of conventional stocks shift from time to time.
Your analysis should help you pay attention to the investment so that you do not end up being the person that invested in a DVD rental business when Netflix is open for early investors. The takeaway here is to understand the space you are operating in to be able to make better choices.
These are just but a few coin investing strategies; you still need to research widely to be able to exploit every possible avenue of trading profitably.
Maintain a Balanced Asset Portfolio
This is one of the oldest tricks in the book, and perhaps the widest used cryptocurrency long-term investment strategy. Being a key strategy in almost all investments you can think of, it is essential that you get it right from the word go.
However much promising a certain project may be in terms of returns or growth, you cannot risk going all in. Any strategy that involves putting all your eggs in one basket is bound to fail, no matter how good it may look at the time.
Economies are affected every day by things we never expected and not in our control – these can be political unrests, increased inflation, technological advancements that render older ones redundant, and more.
All these and other factors can negatively affect the price of an asset that had initially been very stable (and looked promising), and when that happens, you will be in a better place to cover any losses using other assets whose prices may have remained stable.
This may sound like a cliché to you, but the essence of maintaining a balanced mix of cryptos is quite vital.
And truth be told, even the best of projects with solid teams behind them have failed in the past. A lot goes into maintaining a steady portfolio, but a great way to start is through diversification.
Keep Off Overhyped Cryptocurrency Projects
This is so typical of pump and dump projects. The initiators like to hype them so much on various platforms, including YouTube, Reddit, Facebook, among others to ensure that they acquire as many investors a possible.
At this point, you will need to refer to the strategy that talks about the fear of missing out. Do not be tempted to invest in a project just because your associates or promoters seem to be doing a great job convincing everyone around you.
Understand that it is not humanly possible or even prudent to invest in all opportunities that come your way; some are worth it but others are simply ‘distractors.’
People heavily promote products they have invested a lot in, and certainly, at a much lower price.
If you come in as a late investor, you risk being a bag holder since the owners tend to spread the risk of an unworthy investment to the newer investors.
This is why you need to know where to draw the line and when to say no to an investment opportunity. Hopefully, this crypto investment strategy guide eases up that process for you.
Reward Yourself When You Gain Profits
As much as this cryptocurrency investment strategy advocates for long-term holding of assets to realize the full essence of an action plan, you need to know when to get out and enjoy the profits.
For instance, holding an asset for years without harnessing its profits could be risky.
As you may have noticed with the three mentioned cryptos, their markets are quite volatile – you may need to occasionally pull a profit from your list of assets ahead of any price fluctuations.
The volatile nature of the cryptocurrency markets goes both ways, just like you can wake up a millionaire from crypto gains, you can also wake up with zeros in your account. So, stay vigilant and pull out profits whenever possible.
Keep Some Fiat Currencies
Fiat currencies are legal forms of money permitted by various states. Keeping all your money in the form of cryptos might be risky in case the market crashes with all your money.
Fiat currencies can help you invest in other opportunities in case things go south on the cryptocurrency side. It may be tempting to put a big chunk of your money in crypto, but you will be grateful you kept something equally meaningful aside when the market corrects.
What are Some of the Best Cryptocurrencies to Invest in?
There is no single best long-term cryptocurrency that can solely guarantee you profits. However, there are a few coins that have been known to perform relatively well. They include:
Even if you are new to cryptocurrencies, you have probably come across the term Bitcoin. It was the first crypto to be developed and is currently the highest traded coin around the world.
Being the global leader in cryptocurrencies with an overall market share of 40%, Bitcoin is one of the coins whose price consistently remains competitive. Despite the market being bearish at the moment, the coin still remains the most valued among all cryptos. If you are going to invest in this space, this coin might offer you the perfect place to commence your investment journey.
Bitcoin’s price has also been one of the most fluctuating virtual currencies. Take a look at the chart below that shows the trend in its price over time.
As you can see from the image above, the coin had a pretty steady price increase in the better part of 2016 and 2017. In December 2017, it reached an all-time high of $19,000 per coin, and since then, its price and that of other coins have been fluctuating very sharply.
Ethereum is the second most popular coin today. In terms of market capitalization, Ethereum currently boasts a cool $20.3 billion, coming second after Bitcoin’s $110 billion.
Being one of the most traded coins, ETH has also experienced a lot of price fluctuations. In late 2017, the coin’s market price averaged $720 and, in early 2018, it hit a high of $1,423. When at its highest price in 2018, the coin had a market cap of $130 billion, so you can imagine how deeply the cryptocurrency market can correct.
But even as Ethereum’s price fluctuates, we will remember that it shocked many when it rose from a price of $11.5 in 2016 to a high of $720 in 2017, then an even higher price of $1,423 in January 2018. The figures reflect a growth rate over 11,000% within a period of two years.
So, if you are asking yourself whether you should or should not invest in this coin, the truth is, no one really knows. But if history serves us right, then we are talking about one of the most promising coins in the history of cryptocurrencies.
This is the third most traded cryptocurrency after the big two; however, there is still a thin line between Litecoin and Ripple in terms of market share. Both of these coins have been listed on a number of popular exchanges including Coinbase, Coinmama, Binance, among others.
Litecoin has made huge strides towards competing globally – the coin attained an average gain in value of over 8,000% in 2017 alone having moved from a price of $4 in January to $358 in December 2017.
However, just like its bigger brothers (Bitcoin and Ethereum), its price has been on a downward slope and it currently stands at $49.
Litecoin was created in 2011 mainly to improve on Bitcoin’s flaws including transaction speeds, and it currently runs four times faster than most coins. The coin runs on the Lightning Network, meaning most coins are no match for LTC’s speeds.
As we come to a close, this crypto strategy guide will not be complete we do not mention the following: You need to consider storing your assets using a safe offline storage device to cushion you against any risks associated with online businesses such as hacking. Hardware cryptocurrency wallets, such as Ledger Nano S and Trezor, have been proven to work better than their online and desktop counterparts.
Are there any strategies you wish to add on the listed ones? Let’s keep posting them in the comments section to help create a better cryptocurrency trading experience.